graphic     It is particularly helpful to think of the slope of the budget constraint as the negative of the ratio of the price of the good graphed on the horizontal axis over the price of the good graphed along the vertical axis. Seen this way, the slope of the budget constraint is the opportunity cost of one good in terms of the other, or the market rate of substitution between then two goods.

    We can also compute the slope in the traditional way as the rise over the run, using any two bundles along the constraint, or using the endpoints.

Copyright © 1995-2004 OnLineTexts.com, Inc. - All Rights Reserved